News

Danville man pleads guilty in $200 million fraud scheme

Admits role in causing banks to approve mortgage loans for unqualified buyers based on misleading applications, prosecutors say

A Danville real estate executive has pleaded guilty to a $200 million mortgage fraud scheme that took place during the height of the housing crisis, according to an unsealed plea agreement.

Ayman Shahid, 39, was the president of Concord-based Discovery Sales Inc., a company Albert Seeno III created to market homes built by other companies that he had founded, including Discovery Builders, Inc. and the Albert D. Seeno Construction Co., Inc., among others, prosecutors said.

In the plea agreement, Shahid confessed to being part of a scheme that caused banks to approve mortgage loans for unqualified buyers on the basis of false and misleading applications for homes with inflated prices.

Between 2006 and 2008, over 325 homes were built under the scheme, amounting to sales in excess of $200 million, prosecutors said.

Foreclosures and short sales from the homes amounted to approximately $75 million in losses, according to prosecutors. Fannie Mae and Freddie Mac, which purchased mortgage loans used to pay for the homes, lost roughly $3.5 million.

U.S. Attorney Melinda Haag said in a statement that Shahid and his co-conspirators were responsible for saddling the banking system with dozens of fraudulent mortgage loans without regard for the damage those loans would cause to individual home buyers, investors and the economy as a whole.

"Shahid fraudulently inflated the price of homes purchased by individuals who were unable to pay their mortgages in the long run," Haag said. "By doing this to serve their own narrow economic interests, Shahid, and actors like him, contributed to the housing bubble."

Under the plea agreement, Shahid admitted to directing employees to offer significant cash offers and other incentives to new home buyers in an effort to drive up the price of the homes.

In some cases the homes were worth less than the loan amounts, according to court documents. Prosecutors alleged that Discovery Sales made little or no effort to determine the true value of the homes.

To hide the incentives, Discovery Sales worked with Wells Fargo and J.P. Morgan Chase, which prosecutors described as "preferred lenders," who knew that the incentives were not being disclosed in loan files, prosecutors said.

When those lenders were not involved, Shahid and his employees took pains to hide the amount of cash being offered so that lenders would approve the buyers' loans, despite the fact that they had little money of their own, according to court documents.

The inflated prices allowed Seeno's construction companies to secure credit based on the inflated value of the homes, which were being used to finance property acquisitions or to build new homes, according to court documents.

Shahid is now facing 30 years in prison, a $1 million fine or twice the gain or loss of the scheme, and restitution to be decided by the court.

He is next due in court on Dec. 10 for a status hearing.

— Bay City News Service

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Comments

4 people like this
Posted by PSMacintosh
a resident of Danville
on Aug 25, 2015 at 10:40 am

Additionally, these illegal actions made it more difficult for honest mortgage lenders, bank employees, real estate agents, and appraisers to do and obtain business during difficult years as unscrupulous or naive people went elsewhere for these "better deals". As tough as some of these years were, this caused some honest real estate people to "go out of the business". Sometimes the "survivors" were the unethical ones.
This white collar criminal deserves whatever sentence can be allotted.

And why haven't the dirty employees at the major banks (Wells Fargo, Bank of America) been identified and brought to justice as well.
There are always some unethical people who escape being identified and usually end up either being promoted upward or retiring out of the system altogether.
Find these additional preps and nail them!


4 people like this
Posted by Herman Glates
a resident of Danville
on Aug 25, 2015 at 11:03 am

Herman Glates is a registered user.

The Obama Justice Department did not begin a serious national investigation of Wall Street’s pre-crash mortgage-banking activities until mid-2012. By then, the five-year statute of limitations for ordinary criminal fraud charges had passed.

Unfortunately, under Obama, rich bankers who make campaign contributions don’t go to jail. That wasn’t always the case. Back when Reagan and Bush Sr. were president, following the savings-and-loan crisis of the 1980s, more than 1,000 bankers of all stripes were jailed for their transgressions.

This is just one more example of how Obama has refused to his duty to enforce the law.

If you’d like to learn more about this topic, there’s an interesting article in this month’s Atlantic Magazine, titled “How Wall Street’s Bankers Stayed Out of Jail,” by William D. Cohan.

Here’s a link to the article:

Web Link


4 people like this
Posted by PSMacintosh
a resident of Danville
on Aug 25, 2015 at 11:14 am

I happen to know more about the mortgage industry than most (the man on the street as indoctrinated by the stupid press).
Here's what most people still fail to understand and recognize about the last Mortgage Crisis:

The small amount of "bad action" by these few bad apples (such as Shahid and others mentioned in this article) is not what really created the "2008 Mortgage Crisis". There have always been these minor bad apples in the real estate industry that have needed to be discovered and stopped. But their impact upon the entire lending/real estate system, although damaging, has been minimal in terms of dollar impact and national magnitude.

The predominant and actual cause of the "2008 Mortgage Crisis" was BAD ACTION by BAD POLITICIANS (predominately from the liberal, Democrat party--such as Barney Frank, one of the worst of all) who deliberately forced Fannie Mae and Freddie Mac to dramatically lower their lending standards and credit criteria, to adopt new lending programs that were unwise and radically non-conservative, in an effort to gain political favor amongst their liberal-minded constituents. Barney Frank was implementing the leftist concept that "all people should be able to have their own house" regardless of their true financial ability and credit-worthiness.
These Politicians have gotten away with it. (And, oh, were they good at pointing the finger elsewhere!)
A lot of selfish, self-serving Borrowers went along with the new loan programs (to get their bigger house when they couldn't afford the higher interests that were coming), but didn't want to go along for the ride during the slide. Many of these Borrowers outright lied on their applications about their true income, expenses, and net income.
These unethical (lying, cheating) Borrowers have gotten away with it. (That's right, keep your eyes down....and point your finger elsewhere--like at "Wall Street". No one wants to say the way it really is.)


BAD POLITICIANS with wrong concepts + SELF-CENTERED PEOPLE knowingly pushing the boundaries of financial sense = the 2008 Mortgage implosion.
It was a house of cards ready to fall. (Has it fallen completely yet?)

Please stop all this nonsense about how it was "the unethical Bankers" or "terrible Wall Street brokers" that caused the Mortgage Crisis. They could never have engaged in their actions concerning these newly designed types of loan programs IF the LIBERAL POLITICIANS had not stepped in to CHANGE the lending policies of FANNIE MAE and FREDDIE MAC from conservative policies to "easy loan" policies, allowing UNSUSTAINABLE LOANS to be designed and then come crashing down in 2008.

If we haven't learned that lesson correctly and truthfully, then IT WILL HAPPEN AGAIN!

Go ahead now and spout your ingrained "conspiracy theories" about how it was the "rich guys" screwing the poor borrowers on purpose. Ignore the the out-of-financial-control, liberal Politicians, again.


3 people like this
Posted by Herman Glates
a resident of Danville
on Aug 25, 2015 at 12:23 pm

Herman Glates is a registered user.

Concerning your comments about liberal politicians like Barney Frank and foolish people borrowing more than they could afford, all I have to say is, “Amen brother.” You are right.

But bankers share some of the blame too. There is ample evidence that wall street bankers engaged in criminal activities, including failing to disclose conflict of interests and deliberate misrepresentation of risk.

Certain other non-criminal behavior contributed to the crisis, such as credit rating agencies (i.e. Moody’s and Standard & Poor’s) doing a bad job, rating various investments as “high quality” when they should’ve rated them as junk.


Like this comment
Posted by Dave
a resident of Danville
on Aug 26, 2015 at 11:39 am

Not just a "bad job." The rating agencies did a criminally greedy job of intentionally mislabeling bundles of securitized mortgages.

And let's not forget that the repeal of the protections of the Glass-Steagall Act (which prevented the banks from using their customers' deposits to trade speculative, high-risk securities (like the securitized mortgage bundles)) -- by the Gramm-Leach-Bliley Act in 1999......another example of the disasters that result when so-called conservatives blindly throw out long-standing regulatory protections in the name of "regulatory relief."


Like this comment
Posted by Progressive
a resident of Danville
on Aug 26, 2015 at 12:33 pm

Let's blame every problem on the Dems. (HaHa). The good days will end on January 20, 2017, with the coronation of Trump (he will finally be able to take his toupee off). All our problems with be over. The GOP if you recall has the best foreign policy ideas and will bomb the world back to the 2nd century bc. And lets no forget their brilliant trickle down economics. I will be waiting eagerly for my trickle to arrive, as I have done since the Bush tax cuts of 2003. When is the trickle arriving.


Like this comment
Posted by David
a resident of Danville
on Sep 2, 2015 at 11:16 am

Sorry PSMacintosh but give me a break. The VAST majority of 'Bankers' are dishonest and or unethical. This flows down to even Bank Tellers. I know there are some honest folks working at Banks but Banks as a WHOLE are unethical and essentially try and steal whenever possible. Whether that be hidden 'Service Charges' to a regular checking account or adding absurd 'Fees' to the Mortgage at closing. Everyone has their greedy hand in the pot. Before AND after the crisis. So the reputation of the industry for being dishonest and sleazy has been justified and verified through hard evidence of theft and corruption over the past few years. And for many years before the crisis.

In regards to the large Banks, they're borderline criminals if you ask me.

Just some information...'Fee Based Income' is a large chunk of how Banks and Financial firms generate revenue. 'Fee Based Income' generators are the ticky tacky hidden fees that most folks don't notice. There are employees who's jobs are to create those fees and make them hard to detect and well, almost impossible to avoid. Don't you wonder why Banks and Mortgage Companies are so heavily frowned upon by the general public? There was no trust for them BEFORE the crisis.


Like this comment
Posted by PSMacintosh
a resident of Danville
on Sep 2, 2015 at 12:04 pm

" The VAST majority of 'Bankers' are dishonest and or unethical. This flows down to even Bank Tellers. ....Banks as a WHOLE are unethical and essentially try and steal whenever possible. ...."

David,

You are mis-guided and sadly influenced by Leftist propaganda.
I've been banking for decades and NEVER had "hidden" fees charged to me. Why is that, if it is so rampant!?!

Especially after all the Disclosure regulations from the 1970s onward, everything gets disclosed! READ your documents.

You are completely deluded and have the world upside down. MOST Bankers are honest and seeking to operate on a very small margin (like grocery stores).
Have their been some problem Bankers over the years? Yes. They've usually been caught! There are criminals in every industry.

Grow up.....and learn the truth about what you speak about before you make so many unfounded, blanket, over-large assertions.

A lot of the problems have happened because of lazy, greedy people who don't read the documents and think that they can get away with complaining about things later when the economy goes against them--claiming that they didn't understand things simply as a ploy (as guided by some Attorney or Politician) to try to get away with the consequences of their decision in agreeing to terms. Some people try not to understand things.

David, how many times have YOU got cheated out of money by Bankers? And how many pennies was it?


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